Policy ID
03.01
Policy Name
Maximum Loan Term and Exit (Repayment) Strategy
Policy Content
This policy contains commercially sensitive and confidential information. No part
should be made available in any form whether printed, electronic or otherwise,
outside the Westpac Group without approval from Westpac Legal or Regulatory
affairs.*** This document is an UNCONTROLLED copy and is subject to change without
prior notification. It is only valid at the date of extract. ***
1.1 Why this policy?
2. Rules you must apply
2.1 Maximum loan term
2.1.1 Maximum Loan Term for Interest Only (IO) products
2.2 Retirement age and exit / repayment strategy
2.2.1 Retirement age and exit / repayment strategy
2.2.2 Exit (repayment) strategy exclusions
3. Process to follow
3.1 Record Keeping Requirement under Responsible Lending
3.2 Exit strategy-Non-real estate and real estate assets
3.2.1 Shareholding calculation
3.2.2 ASIC MoneySmart Superannuation Calculator settings
4. Guidelines
4.1 Examples of acceptable and non-compliant responses to exit strategy questions
4.2 Examples of acceptable and non-acceptable use of Superannuation lump sum as exit strategy
Refer to individual Product Policies for any additional loan term restrictions or requirements that may apply to specific products.
If the loan application requires mortgage insurance, refer to Lenders Mortgage Insurance where required.
Consideration should be given to the applicant’s remaining time in the workforce. The applicant’s ability to retire or service the new debt without the applicant incurring substantial hardship post retirement age must be considered.
The ability to meet repayment obligations and clear the debt may be from:
Where there is more than one applicant / income reliant guarantor, the age of the oldest applicant or income guarantor is to be used when assessing the maximum loan term.
Where a combination of exit / repayment strategies will be used, the details of each strategy must be documented.
When the applicant / income guarantor’s is relying on one or more of the below strategies, the associated asset values (where applicable) must be greater than or equal to the amortised loan amount for the loan being requested at the intended retirement age.
1. Access the asx website: https://www.asx.com.au/, from the shareholding certificate identify the company ASX code.
2. Enter the code into the look up field
3. From the drop down list select the correct issuer, hit enter.


4. Identify the “last” value (as highlighted above)
5. Retain a copy of the ASX search result
6. Multiply the number of shares held x last value
7. Record the result of the calculation as the ‘account balance'
Populate the “You and your super fund” section of the calculator with the borrowers’
information:
Table of Contents
1. About this policy1.1 Why this policy?
2. Rules you must apply
2.1 Maximum loan term
2.1.1 Maximum Loan Term for Interest Only (IO) products
2.2 Retirement age and exit / repayment strategy
2.2.1 Retirement age and exit / repayment strategy
2.2.2 Exit (repayment) strategy exclusions
3. Process to follow
3.1 Record Keeping Requirement under Responsible Lending
3.2 Exit strategy-Non-real estate and real estate assets
3.2.1 Shareholding calculation
3.2.2 ASIC MoneySmart Superannuation Calculator settings
4. Guidelines
4.1 Examples of acceptable and non-compliant responses to exit strategy questions
4.2 Examples of acceptable and non-acceptable use of Superannuation lump sum as exit strategy
1. About this policy
1.1 Why this policy?
This policy will help you determine the maximum loan term when assessing a residential loan application.Refer to individual Product Policies for any additional loan term restrictions or requirements that may apply to specific products.
If the loan application requires mortgage insurance, refer to Lenders Mortgage Insurance where required.
2. Rules you must apply
2.1 Maximum loan term
- The maximum term for an amortising loan is 30 years including any initial interest only (IO) period, however this may depend on the applicant’s age.
- The maximum term for a bridging loan is 12 months.
Consideration should be given to the applicant’s remaining time in the workforce. The applicant’s ability to retire or service the new debt without the applicant incurring substantial hardship post retirement age must be considered.
The ability to meet repayment obligations and clear the debt may be from:
- Income (including retirement income), or
- Asset equity including the sale of an asset (other than primary place of residence except where the sale and downsize of the property is appropriate)
2.1.1 Maximum Loan Term for interest only (IO) products
| Category | Policy rule |
|---|---|
| Interest only (IO) converting loans repayment term |
|
2.2 Exit (Repayment) Strategy – Responsible Lending
During the Requirement and Objective (R&O) conversation, where any applicant or Income Guarantor ('Spousal-Income + Security Guarantee’ or ‘Spousal - Income Guarantee') is 45 years or older , the lender / assessor (via the broker) must:- Make further enquiries to find out when the applicant or Income Guarantor intends to retire (retirement age) and follow the additional requirements detailed in the Retirement age and exit / repayment strategy table. And
- Provide the applicant / income guarantor’s with an estimate of the projected outstanding loan balance at their declared retirement age. And
- Record the declared retirement age and the projected outstanding loan balance at the declared retirement age in the “what you told us” (Responsible lending questions) section of the loan application. And
- Where the applicant / income guarantor’s is:
- Equal to or greater than 55 years of age;
- 45 years or older and is less than 10 years from retirement, then:
Where there is more than one applicant / income reliant guarantor, the age of the oldest applicant or income guarantor is to be used when assessing the maximum loan term.
Where a combination of exit / repayment strategies will be used, the details of each strategy must be documented.
When the applicant / income guarantor’s is relying on one or more of the below strategies, the associated asset values (where applicable) must be greater than or equal to the amortised loan amount for the loan being requested at the intended retirement age.
2.2.1
Retirement age and exit / repayment strategy
| Loan applicant / income guarantor’s age and number of years from retirement | Exit / repayment strategy | Additional requirements | Verification1 |
| 45 to less than 55 years of age and more than 10 years from retiring | Not required | No additional requirements | Not required |
| Is 55 years of age or older. OR 45 years or older and is less than 10 years from retiring |
Repayment of loan prior to retirement | The loan term must not extend past the declared retirement age. | The age and loan term as recorded in the loan origination system must be used. |
| Downsizing
home (Owner Occupied Primary Residence) Or Sale of assets (Secondary Residence, Holiday home or Investment property) |
The property owner/s must match the applicant / income guarantor’s of the new loan only. | Where the property is being purchased and used as
security collateral for the loan application
use:
|
|
| Confirm the current property value |
When the property is security collateral for the
loan application use:
|
||
| Confirm the Limit and balance of existing debt (if any) against the property | Documents as obtained through normal loan processing, refer Commitments > Confirm details of the commitment | ||
| Confirm the amortised loan amount at the declared
retirement age |
|||
| Confirm that the current property value is sufficient repay and close all debt supported by the property | Add any existing debt secured by the property to the calculated amortised loan amount then subtract this amount from the current property value. | ||
| Recurring income from superannuation | Serviceability must be assessed based on the superannuation income only | Refer Verifying Income > Supplementary Income types > Superannuation income | |
| Superannuation lump sum following retirement Corporate Industry and Retail superannuation fund. |
Where superannuation is the sole exit strategy and the current super balance is lower than the amortised loan amount at the intended retirement age, the projected super amount can be considered as the asset value if the below is held:
|
|
|
| Superannuation lump sum following retirement Self-managed superannuation fund (SMSF) |
|
|
|
| Savings Includes (but not limited to):
|
|
|
|
| Income from other investments | Serviceability must be assessed based on the income from other investments only | Refer Verifying Income > Supplementary Income | |
| Co-applicants income | Serviceability must be assessed based on the co-applicants income only | Refer Verifying Income | |
| Other exit strategy not detailed above | The loan application must be referred to credit for exception consideration | Supporting documents evidencing the declared exit strategy, where applicable | |
1 The
documents used for verification
must:
|
|||
2.2.1 Exit (repayment) strategy exclusions
We do not need to capture repayment strategy in the following scenarios:- Where the applicant is already retired at the time they take the loan out and serviceability is calculated only on their retirement income
- Bridging loans with no end debt (as serviceability is not required to be demonstrated)
- Guarantors offering non income reliant
guarantees
- Spousal-Security Guarantee, or
- Family-Security Guarantee, or
- Shared Equity Guarantee
3. Process to follow
3.1 Record Keeping Requirement under Responsible Lending
In all cases the outcomes of the Retirement Strategy – Responsible Lending questions must be documented. Where a combination of strategies will be used, the details of each strategy must be documented.- Brokers will use Applyonline to capture this information in application notes.
3.2 Exit strategy-Non-real estate and real estate assets
| Process |
|---|
In the origination system, record the value of the
asset/s used in the exit strategy:
|
3.2.1 Shareholding calculation
1. Access the asx website: https://www.asx.com.au/, from the shareholding certificate identify the company ASX code.
2. Enter the code into the look up field
3. From the drop down list select the correct issuer, hit enter.
4. Identify the “last” value (as highlighted above)
5. Retain a copy of the ASX search result
6. Multiply the number of shares held x last value
7. Record the result of the calculation as the ‘account balance'
3.2.2 ASIC
MoneySmart Superannuation Calculator settings
Populate the “You and your super fund” section of the calculator with the borrowers’
information:
- Age
- Income before tax
- Desired retirement age
- Super balance as verified on a recent Superannuation statement (Superannuation balance may be a combination from various Superannuation funds)
- Employer contribution – set as the default value and unchanged [per disclaimers on the site, ASIC MoneySmart’s calculator also automatically updates to reflect the mandatory Government superannuation contribution]
- Additional contributions – set as “No”
- Contribution fee % - set as “0%”
- Admin fees – set as “$50”
- Indirect cost ratio – set as “0.6%”
- Fee level – set as “Other”
- Investment option – set as “Other”
- Investment return – set as “3.80%”
- Tax on earning – set as “10.60%”
- Investment fees - set as “0.30%”
4. Guidelines
4.1
Examples of acceptable and non-compliant responses to exit
strategy questions
| Category | Guidelines |
| Examples of appropriate comments (this is not an exhaustive list) |
|
| Examples of responses which are not compliant (this is not an exhaustive list) |
|
4.2 Examples of acceptable and non-acceptable use of Superannuation lump sum as exit strategy
| # | Scenario | When applicant declares that they intend to use
Superannuation as an Exit Strategy during R&O. Does they intend to be retiring at age 67 or more (Government Age Pension age)? Please note: all scenarios will require a retirement age that meets super preservation age. |
| 1 | Applicant indicates they will be retiring at
65yrs. The loan is secured against an investment security collateral only. The customer also owns (unencumbered or mortgaged) an owner occupied residence not offered as security collateral |
No. The 67yrs requirement doesn’t apply as applicant
will have 2 real estate properties upon loan settlement
(i.e. new investment property and existing OO). |
| 2 | Applicant indicates they will be retiring at
62yrs. The loan is secured against an investment security collateral only. The customer does not hold / own any owner occupied residence (i.e. they are renting) |
Yes. The 67yrs requirement is applicable here as
applicant only has 1 real estate property upon loan
settlement. Given applicant indicates they plan to retire at 62yrs the use of superannuation as an exit strategy is not allowed as per policy. would be required to have further discussion with customers to explore other sources of exit strategy. |
| 3 | Applicant
indicates they will be retiring at 66yrs. The loan is secured against an owner occupied primary security collateral and investment security collateral. |
No. The 67yrs requirement doesn’t apply as applicant
will have 2 real estate properties upon loan settlement
(i.e. investment property and OO). |
| 4 | Applicant indicates they will be retiring at
65yrs. The loan is secured against an owner occupied security collateral only. The customer has other non –real estate assets (savings, shares) but no other real estate assets. |
Yes. The 67yrs requirement is applicable here as
applicant only has 1 real estate property upon loan
settlement. Given applicant indicates they plan to retire at 65yrs the use of superannuation as an exit strategy is not allowed as per policy. Broker would be required to have further discussion with customers to explore other sources of exit strategy. |
| 5 | Applicant indicates they will be retiring at
62yrs. The loan is secured against an owner occupied primary security collateral and owner occupied secondary security collateral The customer has no assets other than super and the above properties |
No. The 67yrs requirement doesn’t apply as applicant
will have 2 real estate properties upon loan settlement
(i.e. primary and secondary OO properties). |
| 6 | Applicant indicates they will be retiring at
62yrs. The loan is secured against an owner occupied secondary security collateral only (holiday home). The applicant also holds another owner occupied residence (i.e. their primary place of residence) |
No. The 67yrs requirement doesn’t apply as applicant
will have 2 real estate properties upon loan settlement
(i.e. primary and secondary OO properties). |
Change History
| Amendment number | Amendment issue date | Description of changes |
|---|---|---|
| 1 | 3 November 2021 | First OBP issue online for Brokers on the OKA platform |
| 2 | 20 February 2022 | Section ‘2.4 Referring to Credit’ has been deleted from
policy. The Net Equity calculation continues to apply
however there is no longer a requirement to refer to Credit
for MI applications. The remaining sections within this chapter have been renumbered as a result of the removal of section 2.4 |
| 3 | 3 April 2022 |
|
| 4 | 22 May 2022 | Updated section ‘Rules > Exit (Repayment) Strategy Exclusions’ to add ‘Shared Equity Guarantee’ to the list of guarantee types which do not require an exit (repayment) strategy as there is no reliance on the guarantor to service/repay the debt |
| 5 | 17 July 2022 | Minor typo corrections |
| 6 | 21 August 2022 | Change 1 Impacted section 2.3.3 Verifying non-real estate assets. New supporting document type added for verifying asset type > Corporate Industry and retail superannuation. Old wording – Verify by:
Policy housekeeping - Impacted section 2.3.3 Verifying non-real estate assets, asset type > Self-managed superannuation fund (SMSF) Old wording SMSF Tax return accompanied by financial statements and a signed Auditors statement. Review the balance sheet to identify the net SMSF position New wording SMSF Australian Tax return accompanied by financial statements and a signed Auditors statement. Review the balance sheet to identify the net SMSF position Change 3 Deleted references to the ‘Minimum Document Standards Matrix’. The matrix has been superseded, with all matrix rules transferred into the main body of the ‘Document Standards’ chapter. |
| 7 | 20 November 2022 | Change 1 Updated section ‘2.3.4 Verifying real estate assets’ against ‘property value’ row for real estate not offered as security collateral for this loan: Wording changed from:
|
| 8 | 11 May 2023 | 2.3.3 Verifying non-real estate assets
table ASIC MoneySmart Superannuation Calculator settings Added:
|
| 9-11 | 21 May 2023 | Change
1 Policy updated to define Exit strategy criteria where the applicant / income guarantor’s is:
Complete re-write to simplify and clarify requirements |
| 12 | 20 August 2023 | Change
1 Update Retirement age and exit / repayment strategy – to cover use of Westpac Property report age of document |